The Islamic State of Iraq and the Levant (ISIL) on Sunday announced it was establishing a "caliphate" - an Islamic form of government last seen under the Ottoman Empire - extending from Aleppo in northern Syria to Diyala in Iraq, the regions where ISIL has fought against the regimes in power.

In an audio recording distributed online, ISIL declared its chief Abu Bakr al-Baghdadi "the caliph" and "leader for Muslims everywhere".

Though the move may not have a significant impact on the ground, it is an indicator of the group's confidence.

The crisis in Iraq is said to rival the brutal sectarian war of 2006-2007, with more than 1,000 killed and hundreds of thousands displaced within weeks.

Alarmed world leaders have urged a speeding up of government formation following April elections, warning the conflict cannot be resolved by force alone.

Battle for Tikrit

While beleaguered Prime Minister Nuri al-Maliki has conceded a political solution is necessary, his office has for days touted the Tikrit operation, which could be crucial tactically, and for morale in the security forces.

"The security forces are advancing from different areas" around Tikrit, said Lieutenant General Qassem Atta. "There are ongoing clashes."

Atta said troops had detonated bombs planted along routes into the city, which militants took more than two weeks ago.

Witnesses reported waves of government air strikes in central Tikrit and Saddam's former palace compound in the city.

The Iraqi forces, according to Atta, are coordinating with recently-arrived US military advisers in "studying important targets".

Maliki's national reconciliation adviser, Amr Khuzaie, said the crisis was even more dangerous than the brutal Sunni-Shiite violence that left tens of thousands dead.

"Now, the danger is definitely more... than 2006, 2007," he told AFP.

Before, militant groups sparked a "sectarian war, but now (the) war is more organised" and the militants' abilities were greater.

UN Secretary General Ban Ki-moon has raised grave concern about human rights violations and "the rising number of civilian deaths and injuries, with over one million Iraqis having fled their homes due to the fighting", his spokesman said.

'New era of jihadism'

The onslaught that ISIL led this month overran parts of five Iraqi provinces after capturing the Syrian province of Deir Ezzor near Iraq, Raqa in the north, and parts of Aleppo province.

Its leader Baghdadi, who once spent time in an American military prison in Iraq, is touted within ISIL as a battlefield tactician, and is increasingly seen as even more powerful than Al-Qaeda leader Ayman al-Zawahiri.

In this file photo taken Sunday, June 22, a fighter, third from right, with the al-Qaida-inspired Islamic State of Iraq and the Levant (ISIL) distributes copies of the Quran, Islam's holy book, to local residents in central northern city of Mosul, 225 miles (360 kilometers) northwest of Baghdad, Iraq.